As the fall-out from Iceland’s banking crisis continues to make headlines half a decade on, a small savings bank’s dabbling in pizza is the latest embarrassing revelation.
Sparisjóðurinn í Bolungarvík, the savings bank in the small Westfjords town of Bolungarvík, wrote off ISK 250 million (USD 2.2 million/EUR 1.6 million at today’s rate) due to bad loans to pizza joints in Reykjavík. In some cases the bank’s manager overstepped the boundaries set by lending rules.
The revelation comes from the recently released parliamentary report into the massive state intervention needed to save the country’s network of savings banks, which work partly as independent entities and partly together under the Sparisjóðurinn brand.
In early 2007, a company called H.H. ehf. bought the trademark and operations of the three Hrói Höttur pizza places in Reykjavík. The purchase was financed with a combined loan from several different savings banks and denominated in foreign currencies. The proportion of the loan which came from Bolungarvík was about ISK 40 million.
In the same year, the savings bank made other loans to H.H. ehf. and another company, DGN ehf., which was granted a loan to invest in Hrói Höttur pizza’s real estate, RÚV reports.
The debt swelled following the financial crash and the fall in value of the Icelandic króna and both companies eventually went bankrupt, leaving the savings bank with a ISK 251 million hole.
According to the latest parliamentary bank crash report, the savings bank failed to recognize the two companies as linked, even though they were mostly both owned by the same people.
The bank’s manager, Ásgeir Sólbergsson, told the parliamentary committee that he never made the link between the two companies, but that he should have done, with hindsight.
According to the committee’s report, the bank manager overstepped his authority and granted loans which should have been put before the united savings banks’ board. The bank manager counters that he was granted permission for the loans from the chairman of the board, between meetings.
The Icelandic savings banks largely escaped the limelight when the three giants, Landsbanki, Kaupþing and Glitnir collapsed in late 2008 – but only two of the country’s dozens of savings banks escaped without needing to call on emergency government bail-outs. Today there are just four independent savings banks which are not under government ownership.